Large loans like Rightpath's usually come in multiple installments of smaller amounts. "Each installment had a six-month extension subject to customary loan fee. We've done these kinds of projects before and expected the customary loan fee to be about $1,000," Reeder says.

"Well, the extension comes up, and he charges a $3 million loan fee. That's tantamount to loan sharking. It was the sledgehammer that broke the camel's back."


Pastor Stacy Lee at his church, Covenant Christian Center, in Peoria.
Pastor Stacy Lee at his church, Covenant Christian Center, in Peoria.
For years, Mortgages Ltd. investors received monthly checks with pay stubs like this one. (Click here for more details.) The interest payments halted in June, and now investors just hope to recoup their capital.
For years, Mortgages Ltd. investors received monthly checks with pay stubs like this one. (Click here for more details.) The interest payments halted in June, and now investors just hope to recoup their capital.

"One thing a commercial lender is prohibited from doing by the state is failure to fund a commitment. There's extensive documentation from multiple borrowers where Mortgages Ltd. didn't fund the commitment," says Don Gaffney, the attorney who took on Scott Coles.

Little did Gaffney know, but when he represented the Covenant Christian Center pro bono in 2006, he was getting a jump on one of the biggest investor-driven bankruptcy cases in Arizona history.

He now represents Grace Communities, a developer that was using a Mortgages Ltd. loan to remodel the Hotel Monroe in downtown Phoenix. Like Rightpath Limited Development, Grace Communities says its loan was never fully funded.

They're not alone. Charles Lamar and his son Justin are principals with KML Development. The group had planned two high-rises, one in Tempe and one in Phoenix. Mosaic was going to be a 21-story, mixed-use condo tower in Tempe, with a Whole Foods grocery store at ground level.

On a recent Tuesday, Charles and Justin are sitting in the vacant Mosaic showroom in downtown Phoenix. The showroom has model kitchens and living rooms — all featuring the high-end flooring, cabinets and countertops that were going to be available at Mosaic.

The lights are off in the showroom, though, because Mosaic won't be rising from the ground in Tempe anytime soon.

Mortgages Ltd. executives signed a $130 million loan with KML and then showed up for the groundbreaking in Tempe — in October 2007. Two months later — and just $30 million into the loan — Mortgages Ltd. ran out of money.

Today, Mosaic is little more than a $30 million hole in the ground. If Mortgages Ltd. had funded the loan, it would be a 21-story concrete and steel skeleton, with money in the bank to put skin on the bones.

Lamar isn't one to speak negatively — about Coles or Mortgages Ltd. He chooses his words carefully and seems sincere when he says that bad things happen and he wants to work with the company to find an agreeable business resolution.

"As Mortgages Ltd. peaked, they aggressively started pursuing these construction loans. Most of the developers were led to believe that money was there and available. Obviously, when the money stopped, there were a lot of developers left without the funds that they were promised," Lamar says.

"In a perfect world, if the money kept coming in to him, I guess we wouldn't be having this talk. Unfortunately, things changed and everyone became aware very quickly that Mortgages Ltd. did not have the money."

Lamar says that up until the bankruptcy, Mortgages Ltd. was still charging interest payments and increasing KML's balance — even though it hadn't funded the entire loan.

"They were just collecting new money from investors, to give to old investors. The balance is growing and growing while we're just at a standstill," he says.

"We're looking at this as there are a lot of victims. We're not looking to exploit or take an opportunity to go beyond a reasonable solution. We're not trying to be opportunistic. That's not us. It's not our style.

"It's important that all those investors know there's someone out there who's thinking of them. In the court, it's portrayed as us and them. From our perspective, it's not. I care deeply for Barbara Porter [an investor mentioned in "The Rise and Fall of Scott Coles," July 31] and people like that. It just breaks my heart to see that. It motivates me all the more to want to find a way to help."


Perhaps no one understands Mortgages Ltd.'s rise and fall better than David Crantz, the president and CEO of Landmarc Capital & Investment Company in Scottsdale.

Crantz runs the closest thing in Arizona to a company that parallels Mortgages Ltd. Crantz's company specializes in the same short-term construction bridge, or "hard-money," loans as Mortgages Ltd.

Like Coles, Crantz grew up in Phoenix and learned the business of bridge-lending from his dad. In fact, Crantz's dad and Scott Coles' dad (Chuck Coles, who founded Mortgages Ltd. and passed away in 1998) knew each other well — as did their sons. Their companies even rely on many of the same investors and developers.

"They're not gonna know [everything Scott did] for a couple years. But it's very, very obvious to professionals in my industry what he did over there," Crantz says.

"It's black and white. He over-lent on properties, period. I know this for good reason because one of his major borrowers came to my company to borrow money from us. We would never lend him money. I knew [Mortgages Ltd.] had a lot of money out. I used to see the deals come across my desk. We'd see how upside down these were."

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13 comments
Sure Thing
Sure Thing

The people above are just more of Scott's type of phony thousandaires who live in Scottsdale. "Charity?" Sure, it's real easy when you are giving away other people's money and taking credit for it.I had the unfortunate chance to meet and deal with Scott 11 years ago on a $1M loan deal where he was asking me for money to invest with him to buy one of his "bad" loans. Scott personally explained to me his scheme of essentially "loan-sharking" the borrowers by jacking up expenses and legal fees the moment a loan came up or late and that we were all but guaranteed 15-20% returns on our money. I ran the other way.

Karma is a bitch; he was a scumbag and, like Obama and his cronies, you lie down with dogs you wake up with fleas. Anyone who claims that they knew the man and uses words like "honest" and "upstanding" to describe him is the same scum that he was.

Sure Thing
Sure Thing

The people above are just more of Scott's type of phony thousandaires who live in Scottsdale. "Charity?" Sure, it's real easy when you are giving away other people's money and taking credit for it.I had the unfortunate chance to meet and deal with Scott 11 years ago on a $1M loan deal where he was asking me for money to invest with him to buy one of his "bad" loans. Scott personally explained to me his scheme of essentially "loan-sharking" the borrowers by jacking up expenses and legal fees the moment a loan came up or late and that we were all but guaranteed 15-20% returns on our money. I ran the other way.

Karma is a bitch; he was a scumbag and, like Obama and his cronies, you lie down with dogs you wake up with fleas. Anyone who claims that they knew the man and uses words like "honest" and "upstanding" to describe him is the same scum that he was.

Heartbroken
Heartbroken

Scott would never have pulled out of the deal for no reason. Anyone who knows him knows that about him. He was an honest businessman. He was a good, beautiful person, who gave a lot to the community, and you were right in saying he committed suicide because he cared so much about his investors he could not live with himself to fail them in this way. We all took a risk investing in the way we did, and losing it all is a part of that risk. Scott did what he could to try to keep things afloat, but no one could accomplish that in this market - look at all the other companies, much larger, that are failing and need to be bailed out by the Fed.

As for Ashley Coles, she was just riding on the coat-tail of a good man. There is nothing noble or good about her. She is a gold-digger who cared only about herself. The only reason she joined Childhelp and Boys and Girls Club was because she found out Scott's ex was involved in these and she wanted to outdo her. But her commitment to these faded away soon after her marriage. The gloves came right off as soon as she felt she had Scott nailed. Now that he has passed and left what he had to his children (and despite that he did leave her with a lot), she is fighting to take all the money away from Scott's children. That is not a good person. All who know her should condemn her because she has the audacity to do such a horrible thing, not to mention that she was a main cause of his death.

K. Chamberlain
K. Chamberlain

I am really disappointed in regards to the article written by John Dickerson on September 18, 2008 about Scott Coles.I knew Scott and I know his wife Ashley and I consider them to be two of the most considerate, respectful and kind people I have ever met. They are kind to anyone and everyone they meet and they have been extremely generous in their contributions back to our Valley's charities.How often do you, John, spend large portions of your income with local or national charities? And, if income is not an option do you donate your time? Mortgages Ltd gave out high risk loans to clients that could not get loans through typical banking establishments. Therefore Mortgages Ltd.charged higher interest rates for those borrowers because they were considered high risk and not necessarily reliable. This is the exact reason we all have credit reports. Increased interest rates for high risk borrowers are incredibly common when people buy cars, buy houses (now) or sign up for credit cards...etc.I would like to know why the conventional lender pulled out of Pastor Stacy Lee's loan agreement at the last minute. I'm sorry but don't play naive, something was wrong and that quite possibly had something to do with why Scott raised his interest rate. Plus, you have to remember Scott is no longer with us to tell us his side of the story. I have seen many prestigious companies file for bankruptcy in the last 6-7 months- Scott is not an anomaly. We passed a $700 billion dollar bail out plan just so that we don�t loose our banks- which would include our personal savings, retirement�etc.John Dickerson, Seth Goldberg, Susan White and the person that refused to give their name though I�m not sure why since she obviously wanted to express her hatred for Scott but then required that her identity be kept "Anonymous." (She needs to grow a spine- that's pathetic).I would like to know if the clients that said such hurtful things about Scott in your articles were invested with him during the economic boom in Arizona. If they were, I guarantee that they were not complaining then! In addition do they give back time or money to the community like Scott and Ashley did?John, your July 31st article was much less biased though it still included some ridiculous comments like Mike Denning's comment about Scott stating that "He kind of turned into a wanna-be rock star there for a while" which caused me to laugh out loud because it was so far from the truth. Mike was the former president of Mortgages Ltd (do you think he may be a bit angry with his current financial situation now that the company is Bankrupt?!)I am not sure what has happened since your first article on July 31, 2008 because your most recent article in my opinion was obviously meant to damage his reputation even worse. I sensed a bit of anger in that article- was that because you believed every awful thing you were told about Scott by bitter ex-employees or investors, or is it simply because if the article "bleeds it leads?"Scott took his own life which I honestly believe he did because he could not face all of his friends and business partners that had invested a good portion of their life savings with him. Scott has a wife and three children who no longer have a husband/father, and not one person in your articles even mentioned how devastating that is because, in my opinion, they are too self absorbed to have an ounce of remorse for his family and their loss. I personally believe that Scott Coles was a legitimate business owner and like many of us he did not see the economy taking such a fast and drastic down turn and he quickly found himself in a position he simply could not envision himself recovering from. He did live a lavish lifestyle; however you reported that he was constantly having parties at his estate but what you failed to mention is that any parties that we not small, involving close friends, were in his guest house and guests had to pay admission. If I remember correctly the Super Bowl party at his estate last year was around $1,000 a ticket.Lastly I would like to condemn anyone who gave their life savings to Mortgages Limited and is crying about it now- everyone knows that you never put all of your eggs in one basket. Always diversify! Buy a home you can afford (roughly 3 times your annual income) and diversify your savings. And when it all goes to Hell�blame yourself for overextending.

Why
Why

Let the man rest in peace. If God can forgive him then we should to. What's done is done move on this is starting to get old now.

Mr broke
Mr broke

Another story about Coles but Hirsch keeps Coles Ideas alive by wanting to allow a 75 million $ dip loan on centerpoint. Putting 1/2 the 200 million radical bunny money at risk by putting ML in 2nd position on the deed. Centerpoint will be worth half of what they think. The state needs to put RB into receivership and get someone that doesn't keep Coles ideas going.

JW
JW

I take great pride in stating that Pastor Stacy is a GREAT man and never once stole any of the churche's money! Obviously the person who commented in #2 has no clue!! 1st of all Pastor Stacy does not beg for money because he knows that God will provide for the church and the people in it! The people in the church who gave money, gave because they either felt led to, wanted too, or because that is what the bible tells us to do. The family at CCCI is close knit and even though people come and go through the years - we are faithful and know that what God started in the building we now have church in, will be completed and we will grow and expand beyond any of our imaginations.

Before you comment on a Pastor you dont know, please make sure you have all the facts straight. We give because WE WANT too! Pastor Stacy and his wife are incredible people with a great blessing on their lives, and I plan to be around and ministering with them for as long as I possibly can!

God Bless!

JW

TOM
TOM

sCOTT TOOK THE EASY WAY OUT AND TOOK HUNDERED OF REGULAR WORKING CLASS PEOPLE WITH HIM. HIS ACTIONS CAUSED MY CO TO close down. I am out of a job with two kids and a mortage to pay much like everyone else I worked with. I cant tell you how much I hat this man I and the rest of the people who were hert by this will move on and rebuild our lives with our wonderful families. That is the good news the other good news is when we all look back and realize we have pulled up our boot straps and fixed out lives he will still be dead and the world is a better place because of it.

Reed
Reed

Ask Pastor Stacy Lee about the thousands of dollars church parishioners gave to pay for the completion of the church but yet the church is not complete? Where did the money go�.? Not only was Scott Coles a theft Pastor Stacy Lee is the worse theft of them all stealing from his own church. Yes he will give you a good song and dance and led in into another direction but will not give you a straight answer. There are many people from his own church he has defrauded just like Scott Coles. He did lose parishioners because of the court case he lost parishioners because he did not pay back the thousands of dollars people �loaned� to him not gave. He does not like to give people their money back he has a good track record for this just look at the many law suites against him for not paying back.

seth Goldberg
seth Goldberg

Total crook and the New Times should win an award for their reporting..Fraud is fraud he was a dishonest scumbag who took advantage of many people. I now many people who would not do business with him and are hardly surprised..hopefully the Radical Bunny folks go to jail and the investors get something out of this.

Coach Heemel
Coach Heemel

One week after the company assured investors that all was well, Mortgages Ltd. vice president Phillip Sollomi, Jr. wrote a letter on November 15, 2007, to a wealthy borrower, pleading to borrow $2 million so the company could fund another borrower's loan.

Coach Heemel
Coach Heemel

One week after the company assured investors that all was well, Mortgages Ltd. vice president Phillip Sollomi, Jr. wrote a letter on November 15, 2007, to a wealthy borrower, pleading to borrow $2 million so the company could fund another borrower's loan.

 
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